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Oil prices have been on a stomach-churning ride this week, falling below US$66 a barrel amid pessimism over future demand growth and uncertainty about OPEC’s next moves. 

The turbulence arrives as employment in the Canadian oilpatch has hit a nine-year high — topping 210,000 workers in the sector last month — and industry capital spending returns to 2015 levels. 

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Prices for U.S. benchmark West Texas Intermediate crude, which had closed above $80 a barrel in mid-August, tumbled again Tuesday. The near-month contract for oil closed at $65.75 a barrel, down almost $3 on the day and continuing a recent slump. 

“All indications have been that the market has been getting weaker, but current fundamentals in no way justify a $12-a-barrel selloff over the past two weeks,” Rory Johnston, founder of the Commodity Context newsletter, said Tuesday. 

“Everyone is glued to their screens today, basically just waiting for this selling pressure to end, to see where we bottom out.” 

Oil markets have dipped this month amid concerns about the global economy, increasing production and weakening demand in China, one of the pivotal drivers of international growth. 

On Tuesday, the Organization of Petroleum Exporting Countries (OPEC) released its monthly oil market report, projecting consumption will increase by two million barrels per day (bpd) this year and 1.7 million next year.  

Both would be all-time records for demand, yet they’re down slightly from the group’s previous outlook. Meanwhile, supplies are rising in the United States, Brazil and Canada, OPEC noted.

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Canada’s oilsands have been one of the main contributors to new output in 2024, as operators have boosted spending and output to capitalize on new pipeline capacity that has allowed for increased exports from Western Canada. 

There are also nagging concerns about whether OPEC+ countries will bring more curtailed production online near the end of the year. The cartel recently decided to delay a plan to add 2.2 million bpd of supply in October, until at least December. 

“Right now, the market is very much in this bearish mood, so it’s just stuck in the mode where it sees nothing but negativity,” said Martin King, RBN Energy’s managing director of North America energy market analysis. 

“There’s still this view that OPEC will try and put more supply to the market, unless they are more clear about what they’re going to do.” 

Despite the apprehension facing oil markets, the U.S. Energy Information Administration (EIA) reported Tuesday it anticipates Brent crude prices will bounce back above $80 a barrel this month.

In its latest short-term energy outlook, the EIA forecasts the international benchmark price to average $84 a barrel next year, while West Texas Intermediate crude averages almost $80. 

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That would be a lucrative level for producers and the Alberta government, which projects WTI to average $76.50 a barrel for the current budget year. 

With less oil production coming from OPEC and its partners in the next two months, oil demand is expected to outstrip production, the U.S. agency said. 

For Canadian oil producers, the sudden price plunge is garnering attention, but not prompting executives to make cuts to their capital plans. 

“It’s an ugly day in the market,” said Surge Energy CEO Paul Colborne. 

“Everybody will wait and watch…In November, December, there would be cutbacks if oil stayed this low — but I don’t think it can stay this low.” 

Colborne noted the Canadian industry has several factors playing in its favour, including a weak loonie relative to the U.S. dollar, and a narrowing price discount for heavy crude this year. Most companies have pruned their debt levels and can ride out short-term volatility. 

Spending by the Canadian oil and gas sector has increased this year as the $34-billion Trans Mountain expansion began commercial operations in May, improving market access for the industry and ending years of pipeline congestion. The anticipated startup of the LNG Canada project next year is also expected to spur gas exports. 

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Capital expenditures increased to $11.9 billion during the second quarter, its highest level since the third quarter of 2015, ATB Economics noted.  

“We’ve seen an upward trend in oil and gas (capital spending) and it’s coinciding with an improvement that we’re seeing in oil and gas employment nationally,” said ATB chief economist Mark Parsons. 

“The big driver there is market access.” 

Employment in the Canadian energy sector is now at its highest point since October 2015. The industry employed 210,000 people last month, creating 14,400 new jobs over the past year, according to Careers in Energy. 

With the recent decline in oil prices, the S&P/TSX Capped Energy Index has fallen by almost 10 per cent since the end of August, although it’s still up five per cent this year.  

The TSX30 list, which ranks the best-performing companies (by share price appreciation) over the past three years on the Toronto Stock Exchange, was also released Tuesday. Alberta-based oil and gas firms made up 11 of the issuers holding down the top spots.  

Calgary-based Athabasca Oil Corp. notched third place and CEO Rob Broen cited growth in the company’s long-life oilsands assets, its strengthening financial position and returns of capital to investors for its performance. 

As for this month’s volatility in oil prices, Broen said Athabasca will continue with its strategy of returning money to shareholders and planning for competitive growth.  

“Fundamentals are still strong,” he said in an e-mail. “Companies are much more resilient to volatility than ever before with clean balance sheets.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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